Chinese manufacturers signalled a further deterioration in overall operating conditions during April. Both output and total new work declined over the month, albeit at weaker rates than those recorded in March. Fewer new orders led firms to cut their staffing levels at a modest pace, while purchasing activity fell for the third successive month. Meanwhile, both input costs and output charges fell markedly.
After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted at 48.1 in April, down fractionally from the earlier flash reading of 48.3, and up from 48.0 in March . This signalled the fourth successive monthly deterioration in the health of the sector.
Production at Chinese manufacturers fell for the third consecutive month in April, though at a weaker pace than in March.
Panellists generally attributed the latest reduction of output to fewer new orders, which decreased at a marked rate in April. Data suggested that sluggish domestic demand predominantly led to the fall in total new business, as new export orders declined only slightly. Weaker client demand was attributed by a number of survey respondents to deteriorating market conditions.
Goods producers in China cut their staffing levels for the sixth month running in April, amid reports of company down-sizing policies which stemmed from lower production requirements. Moreover, the rate of job shedding accelerated from the previous month.
Despite reduced workforce numbers, volumes of unfinished work fell for the third successive month in April. That said, the rate of backlog depletion was marginal.
Fewer new orders led manufacturers to cut back on their purchasing activity in April. However, the pace of reduction was only slight, having eased from that seen in March. Firms also depleted their stocks of purchases at a marked rate in April, reflective of efforts to lower inventories in line with weaker client demand.
Average input costs faced by Chinese goods producers fell for the fourth consecutive month in April. Despite easing from March, the rate of reduction was solid overall. Factory gate prices also fell during April, and at a solid pace. Anecdotal evidence suggested that charges were cut to boost client demand.
“The final reading of the HSBC China Manufacturing PMI stabilised at 48.1 in April, up slightly from 48.0 in March, and revised down from an earlier flash reading of 48.3," says Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC.
"The latest data implied that domestic demand contracted at a slower pace, but remained sluggish. Meanwhile, both the new export orders and employment sub-indices contracted, and were revised down from the earlier flash readings. These indicat that the manufacturing sector, and the broader economy as a whole, continues to lose momentum."
Over the past few days, Beijing has introduced more reform measures which could support growth by inducing more private sector investment. "We think bolder actions will be required to ensure the economy regains its momentum,” adds Qu.